HomeBusinessTarget revenues fall short as inflation-ridden shoppers avoid things they don't really...

Target revenues fall short as inflation-ridden shoppers avoid things they don’t really need

Target (TGT) missed the profit mark in the first quarter.

Blame inflation-ravaged US households, executives say.

The “biggest challenges” Target is hearing about from its customers are “food and household essentials inflation,” Chairman and CEO Brian Cornell said on a call with reporters discussing first-quarter results.

Cornell added that inflation is “putting pressure on consumers’ wallets.”

He went on to say that sales trends are “normalizing” in categories where inflation has subsided.

The pressure weighed heaviest on Target’s brick-and-mortar stores, where traffic and transactions fell in the quarter.

The sprawling supercenters continued to see weak sales in discretionary departments such as home goods.

Due to the decline in retail sales, Target CFO Michael Fiddelke says the company is “conservatively” planning operations for the remainder of the year.

To right the ship and close the gap with better-performing rival Walmart (WMT), Target on Monday unveiled a plan to cut prices on 5,000 items such as milk, meat and bread.

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The company has already cut prices on about 1,500 items, and this will continue into the summer.

  • Net turnover: -3.1% YoY to $24.5 billion, versus estimates of $24.13 billion

  • Gross profit margin: 27.7% vs. 26.3% a year ago, vs. estimates for 27.4%

  • Diluted EPS: -1% year over year to $2.03, vs. estimates for $2.05 (guidance: $1.70 to $2.10)

  • Comparable sales: -3.7% year-over-year (last year it rose 0.7%; Walmart reported a 3.8% gain in Q1 2024) vs. -3.68% estimate

  • The stock fell 7% from the previous year.

  • The company again did not repurchase any shares this quarter, despite having $9.7 billion remaining from a previous repurchase authorization.

  • Both the number of transactions and the average size of checks fell by 1.9% in the quarter.

  • Target ended the quarter with nearly $3.6 billion in cash.

  • Second-quarter earnings per share are expected to come in at $1.95 to $2.35, compared with an estimate of $2.19.

  • Full-year earnings per share are projected at $8.60 to $9.60 (reiterating previous guidance), versus estimates of $9.43.

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One weapon Target doesn’t have in its arsenal is a cloud services company that could fund retail investments like rival Amazon (AMZN). Amazon Web Services CEO Adam Selipsky joined a new episode of the Opening Bid podcast to talk about what AWS is up to next. Listen in below.

Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.

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